I am a new to the forum and had a Real Estate / Tax Question.
I recently received an offer to buy out my 19% position in a commercial office building. I wanted to use at least part of the money to pay off my HELOC for my personal residence. I wanted to know if this would qualify as a Roll Over with the IRS. I wanted to make sure I wouldn't get hit with capital gains or some other issue that was unexpected.
Thanks in advance,
It doesn't look like this qualifies for any preferential tax treatment.
What you are describing it to use the proceeds from a sale to pay off a personal debt. The Interest on the HELOC may be tax deductible(if used to purchase/improve personal residence) so you may be losing a tax deduction paying off the debt.
If you have the ownership in the commercial office building in your own name - you may be eligible to defer the gain doing a 1031 - like kind exchange.
If you have the ownership through a partnership interest - then you do not qualify to defer your gain.
I appreciate the advice. It is through a partnership and I asked my CPA and she agreed with you that it would not qualify as an exchange because I don't own it directly but only the partnership. Also, as you said the HELOC itself would not qualify.
Assuming your HELOC is still at a nice low interest rate, why in the world would you pay it off? Find another cash producing asset with a yield higher than the cost of the HELOC and create more arbitrage.
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